Solutions will cost Canada

CANADIAN PRESS Now that humans are being blamed for the increase in global temperatures, it's time to do something about it. But is Canada prepared to take action?

With the latest assessment by the United Nations' Intergovernmental Panel on Climate Change now concluding that increases in global temperatures are very likely caused by human activity, the heat is truly on governments of rich and large economies to deliver on solutions that will address and eventually reverse the ongoing growth in emissions of greenhouse gases.

It's those emissions that are a byproduct of economic activity and whose buildup in the atmosphere has created the greenhouse effect.

Such solutions are technically available, but that does not mean that they can be quickly or cheaply implemented. Therefore, they are difficult to adopt in a political context that puts a premium on appearance of action to address long-term problems, rather than on implementing measures that would deliver actual results down a distant road.

The chief source of greenhouse gas emissions in Canada is the burning of fossil fuels (such as oil and coal) by the energy industry, motor vehicle owners and other industries. Other significant sources of such emissions include farming and municipal waste.

One can guess from this short list that what has held federal politicians back from meaningful action toward reducing such emissions in Canada are real-life economic, and therefore political, considerations that, as inconvenient as they are, will almost certainly continue to play a role in the ability of governments to take action to reduce greenhouse gas emissions in the future.

Recent press reports are very revealing. Last year saw sales of gas-guzzling sport utility vehicles reach an all-time high in Canada, according to DesRosiers Automotive Consultants. Environmental friendliness ranked only 23rd out of 26 qualities that matter to Canadians when they purchase a vehicle, according to an extensive survey conducted by Maritz Research. And engineering giant SNC-Lavalin announced the creation of 100 jobs in Montreal due to it having obtained work on an upgrader for Alberta's oilsands.

Alberta's energy-induced growth in the years since Canada agreed, under the 1997 Kyoto Protocol, to reduce its greenhouse gas emissions has led to a disproportionately positive contribution by these provinces to job creation in Canada -- in net, attracting thousands of graduates from other provinces -- and also to the growth in federal revenues. But the booming oil-based economy of Alberta and, in a lesser measure, Saskatchewan are also a major reason for Canada being the farthest away from attaining its emissions targets under the protocol, with the two provinces combining for some 60 per cent of the growth in Canadian emissions since 1990 (the protocol's base year).

In general, Canada's poor record on reducing emissions is clearly linked to the good performance of the economy, as conventionally measured, and particularly linked to the performance of Canada's industrial base, due to factors such as trade, population growth, and strong commodity prices, which Canadian governments have been promoting through other policies.

It is true that timidity in promoting alternative fuels has also played a part in our inability to reduce emissions. Many other countries are further ahead in making a place in their energy portfolio for hydro-electricity, biofuels, wind power and of course, nuclear energy. All of these alternatives will likely make a significant contribution in the future, but they all exhibit severe limitations and constraints as substitutes for the carbon-based sources, whether in terms of reliability, safety, or collateral environmental damage.

The federal government has so far relied on studies, consultations, half-hearted regulations and slogans, under both the former Liberal government and now, with renewed interest, under the Conservatives. Each of these tools has its part to play, but is also rife with caveats, and even jointly will not lead to the long-term conversion to the environmentally sound technologies, urban and other infrastructure, and consumption habits that will be necessary to reduce our emissions.

Slogans, in particular, will only go so far, and can even be harmful when people who heed them take them out of context. For example, a British government study has recently found that encouraging people to "buy local" can have harmful impact on greenhouse gas emissions, since consumers would spew out more emissions driving around in their cars or SUVs looking for locally grown food in small shops, than would be generated by large trucks bringing the food from afar to a supermarket.

The way forward almost certainly involves making consumers, businesses and public institutions pay more for the environmental damage they are creating. Here the Maritz survey paradoxically shows the way: while environmental impact is low on the list of consumer priorities, three of the first four items on that list pertain to costs and value for money. This only confirms what economists and countless reputable stories tell us about the best available tool to reduce greenhouse gas: a mechanism that increases the price of activities that are intensive in carbon and other greenhouse gases, relative to less greenhouse gas-intensive production techniques and consumption patterns.

Such a mechanism could, of course, be a tax based on the "carbon intensity" of each taxed product or activity. Forcing large greenhouse gas emitters that cannot easily reduce emissions to acquire, for a price, emission reduction credits from others that have managed to deeply cut their emissions -- the essence of a carbon trading system -- would play a role that is essentially equivalent to that of a tax, by forcing up the price of carbon-intensive goods and activities relative to others.

Over time, this would constitute a permanent incentive for decision-makers within firms, households and governments to invest in less carbon-intensive technologies and capital expenditures.

Even though Canadians have showed, in recent polls, some willingness to bear some costs in order to address the environmental issues, they are clearly reluctant to address the issue through taxes. Indeed, in general, a lower tax burden would make sense both economically and politically. In this context, it might be fruitful to introduce any new environment tax or greenhouse gas emissions-trading measures in the context of an overall tax reform that would include countervailing cuts in direct personal, corporate and other taxes that are more likely to inhibit economic activity in any event.

The fact that global warming is high on the political agenda will certainly guarantee the kind of "action" that we have seen in the past on this or on other files that have similarly been at the forefront of the public's anxiety. However, based on past experience, this means that Canadians cannot seriously believe that because the issue is high on the agenda, something meaningful will actually be done to address it.

And they should also not seriously believe that a reduction in greenhouse gas emissions can begin without a price being put on the activity that generates them.

Daniel Schwanen is director of research and chief operating officer of the Centre for International Governance Innovation in Waterloo.

ON THE WEB:

To read the latest from the Intergovernmental Panel on Climate Change, visit http://www.ipcc.ch/ Under Information for Press go to Download Summary for Policymakers

The opinions expressed in this article/multimedia are those of the author(s) and do not necessarily reflect the views of CIGI or its Board of Directors.

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